The Sarah Hermitage case and Access to Justice

On 30 November 2012, following a 10-day trial, Mr Justice Bean dismissed a libel claim brought by Reginald Mengi, the Executive Chairman of IPP Ltd, a company which holds major newspaper and broadcasting interests in Tanzania ([2012] EWHC 3445 (QB)). The defendant, Sarah Hermitage, who was represented by Carter-Ruck on a conditional fee basis, had set up a blog to record and to publicise as a warning to others her experience in Tanzania; how, with no protection from the local courts and officials, she and her husband were by threats and intimidation driven out of the country and forced to abandon their investment in their farm, Silverdale.

A major factor in the ordeal they suffered in Tanzania was the hostile and defamatory coverage their case received from IPP newspapers. Despite Mr Mengi’s evidence that he was “not responsible, not accountable and not answerable” for the editorial content, Mr Justice Bean found that he had either “encouraged or knowingly permitted” the media campaign and was in that sense “complicit” in the “corruption and intimidation” which had helped his brother, Benjamin, to seize Silverdale farm. On this basis, he upheld the defence of justification.

Mr Justice Bean ordered that Mr Mengi should pay the defence costs on the indemnity basis. In reaching this decision, the factors cited by the Judge included that the litigation was rightly described as “oppressive”, that “enormous costs had been thrown at the case from the beginning, indeed before the issue of proceedings” and that the evidence of the Claimant and his witnesses had in a number of respects been “misleading and untrue.” He further ordered that Mr Mengi should make an interim payment of £1.2million on account of the defendant’s costs.

The case is the latest example, following those brought against Simon Singh, Henrik Thomsen, Peter Wilmshurst and Hardeep Singh, where individuals sued for libel by wealthy claimants have been able to defend their rights with the benefit of conditional fee agreements. Although herself a qualified lawyer, Sarah Hermitage was confronted by a highly experienced legal team in England led by Richard Rampton QC, supported by IPP’s in-house legal department in Tanzania, with apparently limitless resources. According to the budget prepared for the Case Management Conference in November 2011, the legal costs incurred by Mr Mengi even before the issue of proceedings amounted to £298,245.07. It would have been grossly unfair for Sarah Hermitage, who was in no position to fund lawyers to defend her, to be expected to fight the case on her own. As Mr Justice Tugendhat stated in an earlier judgment, when he ordered that Mr Mengi should pay into court £1.86million as security for costs, “one of the obvious realities…is that [Sarah Hermitage] would have difficulty in obtaining the legal advice and representation she needs to defend this claim without the benefit of the CFA which she has made with her solicitors.”

The provision in the Legal Aid, Sentencing and Punishment of Offenders (“LASPO”) Act 2012 by which success fees in conditional fee cases would cease to be recoverable from opponents would make it more difficult for those of limited means to obtain legal representation. In a situation, likely to be common, where the only realistic possibility of paying a success fee will be from the damages recovered, it would only be economically viable for lawyers to act on a “no win, no fee” basis for claimants where the anticipated award is very high. Defendants, like Sarah Hermitage, who have no prospect of recovering damages, would have no means by which to compensate the lawyers for the risk they take when acting on a conditional fee basis.

Access to justice requires that litigants must have a practical “opportunity to present their case effectively before the court” without an “unacceptable inequality of arms” between the parties (See Steel and Morris v UK, 68416/01 [2005] ECHR 103). There is a serious risk, illustrated by the Sarah Hermitage case, that the effect of the LASPO Act as it stands would be to deprive deserving litigants of the legal representation they need.

It is therefore to be welcomed that on 12 December the Under-Secretary of State for Justice, Mrs Helen Grant, issued a Ministerial Statement announcing that the provisions of the LASPO Act which would remove the recoverability of success fees and insurance premiums will not come into force for defamation and privacy claims until a “new regime of costs protection” has been introduced for these proceedings.

'One law for the rich'

by Andrew Stephenson

In the final days of the Labour Government, last year an attempt was made to rush through Parliament a Statutory Instrument to reduce the maximum success fee recoverable in “no win, no fee” cases from 100% to 10% of the lawyers’ charges. The Merits Committee in the House of Lords expressed reservations with this proposal “on the grounds that it may imperfectly achieve its object”. The provisions were criticised in debate in the House of Lords and finally baulked at the committee stage in the House of Commons. Those who opposed the measure were not seeking to defend existing practice; it was widely accepted that there was a case for reform. The objection to the Statutory Instrument was that it risked causing greater injustice in some cases than it would remedy in others.

Obscurely tucked away in the Legal Aid, Sentencing and Punishment of Offenders Bill presently before Parliament are proposals to amend the Courts and Legal Services Act 1990 which are equally open to objection.

1. “Success” fees for lawyers acting on a “no win, no fee” basis under Conditional Fee Agreements (CFAs) will no longer be recoverable from an opponent, but be limited to a percentage of the damages awarded.

Where claims are contested, lawyers who offer CFAs take on the risk that they will be paid nothing for their services. If it becomes uneconomic for them to accept this risk, individuals who do not have the means to pay the lawyers as the case proceeds will be left unrepresented. If the percentage of damages allowed is too high, claimants will be deprived of a substantial part of the compensation to which they are entitled; if it is too low, the lawyers will not accept the risk. In either event, lawyers would only be willing to act on a CFA for claimants if the anticipated amount of damages is very large; and lawyers will not be willing to act on a CFA for defendants at all.

2. Parties to litigation in certain cases will not be able to recover the cost of “After the Event” (ATE) insurance.

ATE insurance is taken out, usually by claimants, so that the litigant is covered if he loses the case and an order for costs is made against him. Without insurance, litigants may risk losing all that they own. ATE insurance is expensive, because of the level of costs of a contested case, and the risk the insurer takes. If the cost of insurance is not recoverable, in effect it would also have to come out of the compensation to which the claimant is entitled; that is if, by then, there is any left.

In media-related cases (defamation and breach of privacy) the amount of the award of damages is notoriously difficult to predict. Besides which, the priority for most claimants in these cases is not the money, but to obtain an apology or to prevent publication of material. Although, on rare occasions, six-figure awards of damages have been upheld in defamation cases, most cases are settled for far less than this. In Naomi Campbell’s contested privacy case, which went up to the House of Lords, the damages awarded to her were £3,500. Given the risks involved, this would plainly not be a sufficient sum for any lawyer to contemplate acting for a claimant on a CFA, or for a claimant to contemplate seeking ATE insurance, if the success fee and the cost of insurance have to be financed out of the damages.

Nor is it just media-related cases where the problem will arise. My firm, for example, deals with cases where individuals have been mis-sold investment plans, pension products and the like. In some cases the losses suffered may not in themselves be large, when compared with the cost of contested High Court litigation; they can nevertheless be devastating for the individual, for whom the investment may constitute a major part of his life-savings.

It is the availability of CFAs which has enabled individuals to assert their legal rights against wealthy, powerful organisations. People like Kate and Gerry McCann, and Parameswaran Subramayan, the Tamil hunger striker, have been able to defend their reputations against serious libels. Simon Singh, who was sued by the British Chiropractic Association and Henrik Thomsen, the Danish professor sued in London by the US, UK and Norwegian GE Healthcare companies, are two who have benefitted from CFAs in the defence of their freedom of expression. If the provisions of the Legal Aid, Sentencing and Punishment of Offenders Bill were to become law, it is doubtful that in future lawyers will be willing to act in these cases.

Access to justice is itself a fundamental right. It demands that litigants must have a clear, practical and effective opportunity to present their cases before a court. There is wide agreement that the cost of litigation in this country is too high, but the problem will not even begin to be solved by adjusting the rules of recoverability of costs. This latest proposal is not the answer. What it will do, without question, is work to the advantage of those with the deeper pockets, who are able to afford the best legal representation.

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